This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

New mandatory scheme worth up to £1.1bn over four years to replace voluntary agreement

Up to 2 million homes to be helped per year

The Warm Home Discount, confirmed as part of the recent Spending Review, will require energy companies by law to give a discount on energy bills to more of their most vulnerable customers.

The plan is for older, poorer pensioners to receive up to £130 off their electricity bills. Other groups such as low income families and those with long term illnesses and disabilities may also receive this discount.

The new mandatory scheme will replace the previous voluntary agreement with energy suppliers to provide better focused help to vulnerable consumers. Over the four years of the scheme to 2015, the Warm Home Discount will be worth up to £1.1bn and projected to help around two million households per year.

Today a consultation is being launched focusing on the detailed structure of the support scheme, including proposals for who should be eligible for assistance and how they will be targeted.

The Rt Hon Chris Huhne MP said:

“Warm Home Discount does exactly what it says on the tin, in providing money off vulnerable households’ energy bills to help them afford their heating. We’re requiring energy companies to do this by law, but first we need to get the detail right. Warm Home Discount is a practical way to provide tangible financial help on energy bills to more of the most vulnerable.”

The consultation document proposes four key areas of support:

A Core Group - this would be the majority of spend from energy suppliers over the four years of the scheme (2011-12 to 2014-15). These are a well-targeted group of the poorest pensioners who have a high propensity to fuel poverty and a higher risk of excess winter deaths. This section of the model would build on the 2010 Energy Rebate Scheme, a successful data matching pilot between DWP, DECC and the six major energy suppliers that resulted in an £80 rebate being provided to over 200,000 of the poorest pensioner households this year.

A Broader Group - whilst the Core Group have a high tendency to be fuel poor, it is recognised that other groups are at risk of fuel poverty. The proposals would therefore also ensure some support will be available for other groups of vulnerable consumers.

Legacy Spend - The Voluntary Agreement between Energy Suppliers and Government ends in March and our proposals allow suppliers to continue providing these benefits to the customers receiving them for a period of time. These would be transitional arrangements and suppliers would have to manage this spend down over the scheme period and replace it with other more targeted and predictable support.

Industry Initiatives - The proposed model also recognises the good work suppliers have been doing through various industry initiatives under the Voluntary Agreement, and provides room for them to continue funding them. Such activities include working in partnerships to identify vulnerable customers and funding services delivering energy advice to vulnerable customers.

Immediate help for vulnerable homes this winter:

The Winter Fuel Payment remains at the higher rate of £250 for households with someone aged up to 79 years old and £400 for households with someone aged 80 or over.

Cold Weather Payments of £25 per week are paid to pensioners on Pension Credit, people on income-related benefits who are; disabled, have a child under five living with them, or disabled children, when the weather is really cold. So far, this winter, over four million households will automatically receive this payment.

Energy suppliers are obligated under CERT to help the most vulnerable households install energy efficiency measures. We have already taken steps to ensure this work is better targeted.

Tackling the underlying causes of fuel poverty through the Green Deal from 2012

The coalition is committed to a new approach to insulate the country’s homes. This requires a comprehensive approach to energy efficiency - the Green Deal. The legislation will be introduced to Parliament in a few weeks’ time.

Through the Green Deal, many people will be able to pay back the upfront costs of home insulation work through the lower bills that will result. The coalition recognises that extra help is needed to provide more of the most vulnerable and fuel poor households with the basic heating and insulation measures needed to keep homes warm at a more affordable cost.

So, energy companies will be required, under the new Energy Company Obligation (ECO), to focus their assistance on the poorest and most vulnerable households, as well as those in hard to treat properties which cannot achieve financial savings without a measure of support.

ECO, which will replace CERT and CESP when the Green Deal becomes available, will not be about light bulb giveaways - it will be about insulation and improving heating systems - measures which help people manage their bills for the long term.

Notes to editors

As announced at the Spending Review, the coalition will be taking a fresh look at the fuel poverty target and definition in the context of its commitment to focus available resources where they will be most effective in tackling the problems of underlying fuel poverty. More details on the terms of the Review and the Reviewer will be announced in due course.

Excess winter mortality is calculated as winter deaths (deaths occurring in December to March) minus the average of non-winter deaths (April to July of the current year and August to November of the previous year). Statistics on excess winter deaths are available on the Office for National Statistics: Excess Winter Mortality web page.

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